12-11-08 Common Council Minutes - Laserfiche WebLink

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SPECIAL MEETING DECEMBER 11, 2008 certain income threshold. It also generally targeted to homeowners and a key factor in other states, State Government replaces revenue that is lost to local government. In Indiana, the State provided a circuit breaker relief through caps on property for all categories of property, it established no income guidelines and basically told local government to make do with reduced revenue or to enact local income taxes to make up the difference. In St. Joseph County, the schools, libraries, and bus system will lose operating revenue because of the property tax caps, in addition to City, Towns, and County Government. For South Bend the project loses will be 9 million dollars in 2009 and over 18 million dollars in 2010. At the current local income tax rate .08%, St. Joseph County has the tenth lowest income tax rate in the State. Elkhart County is 1 ½ %, Marshall County is at 1 ¼ % and Pulaski County is at 3.13%. Fulton County just adopted an additional .05 local income tax bringing their total rate to 1.93%. Mayor Luecke stated that if they had instituted the local income taxes earlier on, and at the full amount allowable, the property tax rate would have been lower and the impact of the property tax caps would have been less. Two additional local income taxes are being proposed the point .25% public safety tax, which must be used to support police and fire operations and .05% local option income tax which will provide property tax relief for all categories of property. This also reduces the amount of revenue which local units of government lose to the tax caps. The additional .75% rate which is being requested will bring the total local income tax rate to 1.55%. Even with this additional property tax relief and replacement revenue for public safety, South Bend will still receive 8 million dollars less in property tax revenue than currently in the year 2010. Again, this rate does not replace all lost revenue. He stated that they will still need to find more efficiency and perhaps reduce some services. He stated that he has spoken with the members of the Chamber of Commerce about businesses that have gone through downsizing successfully to help re- look at the budget and find a fresh perspective and new ways to provide efficiency in the service of government. Because there is a time lag between the implementation of a tax, collection of that tax, and distribution of the revenues these taxes must be enacted before the end of the year in order to receive revenues for 2010, when the biggest strains hit the budget. If replacement revenues are not in place for 2010, St. Joseph County has projected that it would have to reduce staff by 200 positions. The City of South Bend would see similar cuts including scores of police officers and firefighters, closing parks, and reducing or eliminating other key services. These cuts would be required to live within the revenue stream of the budget. Because of one time additional State Homestead Credits this year in supplemental standard deductions in future years, homeowners will significant reductions in property taxes. Because of the property tax caps on all categories of property, all categories will receive property tax relief in 2009 and accelerating in 2010. One of the reasons that he delayed action on this tax was in hopes that the property tax bills would be out by now, so that people could see the reduction in property taxes that is coming. Unfortunately, that is still not the case. He advised that he has stated from the beginning as he has had these discussions for actually a couple of years, what is happening is a property tax shift. There will be savings on the property tax side and if enacted some increases on the local income tax side. But at the rate proposed, he believes that most home owners in St. Joseph County will still see a positive reduction in the total local taxes paid. He stated that using the Department of Local Government Finance Calculator on their website in South Bend Portage Township, a home with a value of $40,000.00 is anticipated to see $160.00 reduction in property taxes this year. An $80,000.00 home a $350.00 reduction in property taxes, a $100,000.00 home almost a $500.00 reduction in property taxes and a $200,000.00 home almost $1,500.00 reduction in property taxes. He stated that what he is asking people to pay in additional local income taxes will be supported by those property tax savings. Mayor Luecke stated that he gives his commitment that he will continue to seek efficiencies in the delivery of services. He has talked about this during budget time and talked about it for a number of years. South Bend has reduced its workforce by over 90 positions. He stated that he will look to consolidate operations when it makes sense for the customers. Seek other revenue sources to spread the cost of local government and will grow the economy with new jobs and investment to spread the cost of services. Mayor Luecke stated that it is vital that they have sustainable revenues to maintain essential services and quality of life in the community. He stated that he believes that the proposal before the Council tonight does just that. He stated that the property taxes and local income taxes pay for critical services. It is essential that those services be 7